Just because log book not maintained does not mean vehicles used for personal purposes

Just because log book was not maintained does not mean that vehicles were used for personal purposes by the Trustee – ITAT

In a recent judgment, ITAT Pune has holding that just because log book was not maintained does not mean that Vehicles were used for personal purposes by the Trustee.

ABCAUS Case Law Citation:
4922 (2025) (12) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT in rejecting application for registration u/s.12AA of the Income Tax Act, 1961 (the Act) to the appellant.

The Commssioner of Income Tax vide order dated passed u/s.12AA of the Act, had rejected the assessee’s application for registration under section 12A of the Act on the alleged receipt of capitation fee/donations and running on commercial lines. 

The assessee filed appeal before the Tribunal. The ITAT set-aside the order of CIT to examine the issue afresh in terms of scope of enquiry envisaged under section 12AA(1) of the Act. 

The ITAT had categorically held that following Hon‟ble Karnataka High Court that at the time of granting registration u/s.12AA of the Act, the Commissioner cannot consider issue of capitation fee.

In set aside proceedings, the CIT again rejected assessee‟s application for registration u/s 12A of the Act. The assessee again challenged the rejection of application for registration under section 12AA of the Act in the present appeal.

The Tribunal observed that the Pr.CIT had vaguely mentioned that there was clear evidence of collection of Capitation Fee, however, the Pr.CIT had not mentioned any name of the students or the amount of so-called Capitation Fee alleged to be collected by the Assessee.  The entire order was silent on this respect, except a vague allegation.  During the hearing, when ITAT specifically asked Revenue to show the evidence regarding Capitation Fee, no such evidence was brought on record.

The Tribunal further observed that another allegation of the Pr.CIT was that Trust Funds were used for benefit of trustee.  For this purpose, Pr.CIT had mentioned that there was a difference in the cost of construction of Hospital as arrived at by Departmental Valuation Officer and as shown by the Assessee.  Therefore, Pr.CIT concluded that the funds were diverted for construction of Residential Premises of the Trustee.  However, in the order, the Pr.CIT had not mentioned any amount, not mentioned any documentary evidence. In the absence of specific evidence, the allegation had got no meaning.

The Tribunal noted that another ground on which Pr.CIT rejected 12A was that Vehicles owned by Assessee Trust were used for personal purposes by the Trustee.  The Pr.CIT arrived at this conclusion, because no log book was maintained.  However, just because log book was not maintained does not mean that Vehicles were used for personal purposes by the Trustee.

The Tribunal opined that CIT had not brought on record any positive evidence to prove that Vehicles were used by Trustee for their personal purposes.  Therefore, there was no merit in the said allegation.

The Tribunal also noted that the assessee was running educational institutes and hospital, which is a charitable activity as defined in section 2(15) of the Act and PCIT had not made any adverse observations about the same.

The Tribunal further noted that importantly, subsequently the Pr.CIT had granted provisional registration u/s.12A to the Assessee.  This explained that Pr.CIT while granting approval u/s.12A had satisfied himself regarding the objects and activity of the Assessee.  This explained that objects and activity of the Assessee were charitable in nature, which had been verified by Pr.CIT before granting provisional registration u/s.12A of the Act.

In the result, appeal of the assessee was partly allowed.

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